A Robust Cap On Out-Of-Pocket Costs Would Ensure Meaningful Access To Care For All Americans

Our guest blogger is Rep. John Conyers (D-MI), Chairman of the House Judiciary Committee and sponsor of HR 676 (“Medicare for All”).

In his speech last month, President Obama explained that his ideal health care reform plan would include a cap on out of pocket costs because “in the United States of America, no one should go broke because they get sick.” A recent study has found that health care costs contributed to 62 percent of bankruptcies in 2007 – despite the fact that three quarters of bankruptcy filers owned health insurance. The President’s call to action could not be more timely.

To its credit, Congress has taken strong steps to address this issue. In addition to providing subsidies to low-income Americans and mandating that insurance companies cover a certain percentage of a consumer’s total health care costs, both the House and Senate’s reform bills include provisions that would cap family out-of-pocket costs. Once this cap is exceeded, the health insurer would be required to pick up the tab for any remaining health care expenses.

The three versions of the House’s bill, H.R. 3200, would cap yearly in-network out-of -pocket costs at $5,000 for an individual and $10,000 for a family. Similarly, both bills currently being considered in the Senate would cap these costs at $5,950 for an individual and $11,900 for a family. While these caps are considerably better than the status quo –many employer-provided plans lack any sort of cap on out-of-pocket costs – they will likely leave many Americans vulnerable. In particular, working class families with incomes just high enough to disqualify them for subsidies would be at heightened risk to accumulate huge medical expenses.

For example, a high school teacher making approximately 500 percent of the Federal Poverty Level (FPL), or $54,150, would not qualify for subsidies and could pay up to 10 percent of his or her income on out-of-pocket costs if the House’s cap is adopted. The situation is similarly problematic for a family of three making 400 percent of FPL, or $73,240. Such a family could pay up to 14 percent of its income on out-of-pocket costs.

So what would an effective out-of-pocket cap look like? Earlier this summer, Center for American Progress Senior Fellow Elizabeth Edwards noted in testimony before my own House Judiciary Committee that “even moderate levels of out-of-pocket spending relative to family income…created medical bill problems.” A study from the Center for Studying Health Systems Change found that financial pressures on families from medical bills increased sharply when out-of-pocket spending for health care services exceeded just 2.5 percent of family income. These statements and studies seem to reaffirm what most of us have known all along: that in these difficult economic times, asking cash-strapped Americans to pay thousands of dollars in out-of-pocket costs is simply not an option.

During a recent hearing exploring some of the problems associated with our nation’s profit-oriented approach to health care, I asked a panel of executives from some of the largest health care companies in the nation – United Health Care Group, Wellpoint, Aetna, Humana, and CIGNA – if they were concerned about the effect medical debt is having on American families. To their credit, several of them nodded yes. Yet, not one of them offered a defense or tried to explain the business practices promoted by their companies that have wrecked havoc on the lives of their fellow citizens.

The deafening silence emanating from those executives demonstrates why it falls on the shoulders of Democrats in Congress to help the approximately 25 million Americans categorized as “underinsured.” It is abundantly clear that the insurance companies and their allies will not do so voluntarily. Caps of any kind are a direct affront to their business model: charge as much as you can, while approving as little care as possible.

Representative Dianne Watson and I are currently circulating a letter to House Leadership that may offer a way forward. In it, we argue that out-of-pocket costs should be capped at the 2.5 percent of a family’s adjusted gross income recommended by the Center for Studying Health System Change. It is clear to us that, unless they are strengthened, the caps currently being considered will likely be insufficient to eliminate medical bankruptcies and the care rationing that occurs when a family has to balance financial health against physical health.

The buzzword on Capitol Hill these days is “affordability.” However we go about achieving it – be it with subsidies, a robust public health insurance option, or, ideally, through a publicly funded, privately financed single-payer system – the end goal of reform is to make sure that access to health insurance and access to health care are synonymous. Enacting a progressive, yearly out-of-pocket cap will be an important part of reaching this critical goal. Leaders in the House and Senate have made a good start; now they must complete the job by making the idea of affordability a reality.